On
October 1, 1993, the U.S. Internal Revenue Service formally
announced that the Church of Scientology and its myriad
corporate entities had been granted tax exemption. This was a
stunning announcement considering that the IRS had been in
almost constant battle with Scientology since 1966, had
several court (and even a Supreme Court) rulings in its favor,
and had compelling evidence of Scientology fraud,
misrepresentation, and even harassment against IRS officials.
The ruling, however, stopped thousands of lawsuits against the
IRS and individual IRS auditors filed by or on behalf of
Scientology.

"THE WAR IS OVER!" trumpeted International
Scientology News magazine, showing the huge rally
Scientology held to celebrate their "victory" over the
IRS which had created "false reports disseminated
overseas." "…of all the many agencies that barked at
Scientology's heels in the ensuing years, the most
persistent - and the most dangerous - was the IRS… It's
ultimate stated purpose: to destroy the Church of
Scientology."

Did
Scientology win a moral victory over the IRS that was
illegally attacking a religion, or did the properly acting IRS
cave in to the attacks of Scientology in the "war" Scientology
had waged against the IRS?

This
article will review the history of the IRS regarding
Scientology, the October 1, 1993 tax-exemption for
Scientology, and the reasons why this ruling should be
rescinded.

I.
HISTORY

In 1894
Congress passed a law granting religious tax exemption to some
organizations.

In 1953
L. Ron Hubbard, founder of Dianetics and Scientology, wrote
his co-worker Helen O'Brien a letter stating "I await your
reaction on the religion angle" regarding their for-profit
Dianetics centers. In June of 1953 Hubbard wrote of
Scientology that "this is the science of knowing how to know.
It is a science…"

In 1957
the Church of Scientology was granted exemption as a religious
organization. In 1967 the IRS revoked the exemption. From the
time the audit of that revocation began in 1965, Scientology
was at war with the IRS.

L. Ron
Hubbard wrote in 1965 (the year the IRS audit began) that
"Taxes exist only to destroy business. Be impudent. Get rich
and to hell with them. Governments are just a reactive bank we
have to live with for a while."

In early
1970 IRS agent Woodrow Wilson began an audit of Scientology's
records for the years 1968-69.

In the
summer of 1970, Martin Greenberg, Scientology's accountant,
stated that he deliberately disorganized and confused the
documentation provided to the IRS for the audit.

In
February 1973, Henning Heldt, vice president of Church of
Scientology of California, was ordered to bring documents for
an IRS audit. Heldt came to the meeting empty handed on
February 20, and lied, saying he had resigned and therefore
had no control over the asked for documents.

On April
20 of that year, L. Ron Hubbard created the "Snow White"
program, which was designed to rid governmental agencies of
any "false data" regarding Scientology and Hubbard.

In the
summer of 1974 Scientology's Guardian's Office began looking
for a suitable candidate to infiltrate the IRS. By October 21,
1974, Jane Kember - 2nd in command of the GO - wrote
Guardian's Order 1361, which included:

10. Immediately get an agent into DC IRS to
obtain files on LRH, Scientology, etc. in the Chief
Council's [sic] office, the Special Services staff, the
intelligence division, Audit Division, and any other
areas.

16.
Collect data on the Justice Dept.Tax Division for the
org board, the current terminals, and the people
handling Scientology.

17.
When the correct areas are isolated, infiltrate and get
the files.

On
November 1, Scientologist Mitchell Hermann planted a bugging
device in the conference room of the IRS' chief counsel.
Scientologists in a car outside recorded the transmission of
an IRS meeting about Scientology.

On
November 18, Gerald Wolfe, a Scientology operative, got a job
as a clerk typist in the IRS.

On
December 4, Scientologists Hermann and Michael Meisner
illegally entered the IRS exempt organizations office using
fake passes and stole a 10" thick document on Scientology.

On
February 14, 1975, the Church of Scientology of California
(CSC) and Department of Justice had a conference to work out
issues. They agreed to:

Between
January and July of that year, Gerald Wolfe stole the
equivalent of documents stacked 10 feet high from the IRS
offices. In May, Greg Willardson devised Project Thorn which
was designed to "provide a cover for PR [Public Relations] and
legal for the way they obtained IRS docs." The plan also
called for stealing documents about other organizations in
order to hide their specific interest in Scientology. Gerald
Wolfe accomplished this mission.

On May
27, 1975 Mary Sue Hubbard (L. Ron Hubbard's wife and head of
the GO) wrote Jane Kember that:

Our
overall strategy with the IRS shall be as follows:

1.
To use any method at our disposal to win the battle and
gain our non-profit status.

2.
To buy all the time we can in terms of years ... So we
work to win, but also to delay as time works on our
side, not theirs...

In July
Scientology filed a Freedom of Information Act suit against
the IRS. The goal was to get Scientology documents placed in a
location easier to infiltrate.

On July
31, the IRS granted the Church of Scientology of Minnesota
(Minneapolis) tax exemption.

In
November, Scientology planned to use United Churches of
Florida and Southern Land Development Corporation to hide
money from the IRS.

On
December 5, L. Ron Hubbard ordered that dozens of Scientology
operatives be placed in governmental offices to watch for any
activity against Hubbard himself. A new Guardian
Order:

"Place a separate agent into the IRS Office of
International Organizations (OIO) (as this office has a
case preparation or investigative action going on LRH
personally for income tax evasion or something
similar)."

On June
11, 1976, Michael Meisner and Gerald Wolfe were questioned by
the FBI after a security guard became suspicious of their
forged IRS badges. Meisner talked his way out and escaped.

On
November 19, U.S. News and World Report reported that
contributions to Scientology would now be tax exempt.

In
January of 1977 CSC and the IRS held a conference to discuss
audits so far. In June Gerald Wolfe was sentenced to probation
and community service for forged federal
credentials.

On July 8
the FBI raided
the offices of Scientology in Washington DC and Los
Angeles, based on information from Michael Meisner who had
turned himself in to the FBI. Sometime in July a typewriter
case was found in a parking lot with Scientology documents
that were turned over to the FBI because they appeared to show
illegal activity.

On
December 20, the IRS met with CSC to give a final offer of
settlement.

In
August, 9 Scientologists were indicted and 2 others sought for
extradition in the theft of government documents in the "Snow
White" case.

In
December 1979, five Scientology leaders - Mary Sue Hubbard,
Greg Willardson, Henning Heldt, Duke Snider and Richard
Weigand - were convicted
of conspiracy to steal government documents and sentenced
to between two and six years.

June 30,
1980, Scientology attorneys attempted to force Judge Richey to
recuse himself in the Snow White case.

On
October 3 in a lawsuit by Scientology to gain tax exemption,
the U.S. argued that Scientology should be denied tax
exemption because of:

1)
conspiracy to obstruct the IRS,

2)
abuse of religious confidence,

3)
infliction of psychic harm,

4)
blackmail and "fair game",

5)
disconnection policy,

6)
false imprisonment,

7)
false statements to immigration officials,

8)
removal of large amounts of money from US,

9)
false registration of yachts,

10)
drastic punishment of staff and members.

On Nov.
9, CSC's president signed a false affidavit claiming the UK
church is not a part of CSC, even though it is.

On
December 19, Jane Kember and Morris Budlong were sentenced to
2 to 6 years for burglarizing the IRS.

In
October 1982, David Miscavige, new head of Scientology, and
his staff called a Mission Holder's Conference in San
Francisco. At that conference Lymon Spurlock stated "prior to
the end of 1981, a few of us from the CMO got together
and took a look at the corporate structure of the Church with
the view in mind of making it more defensible and more regular
and particularly not understandable by the traditional
enemies of the Church such as the IRS, and to make an
overall improvement." The phrases in italics were omitted in
the transcript, but exist in the tape of the Conference.

In
January 1983, Mary Sue Hubbard was ordered to turn herself in
in 3 weeks to begin her sentence in the Snow White case.

In July
1984, the Criminal Investigation Division of the IRS (Los
Angeles District) began investigating L. Ron Hubbard's tax
returns for the tax years 1979 through 1983.

In
October, the IRS served an administrative summons on the Clerk
of the Los Angeles County Superior Court for access to the
"Zolin tapes." The two tapes purportedly were a recording of a
meeting with Scientology attorneys to defraud the IRS. A
portion of a transcript was made public in court:

There is no need at all for them to be the Board
of Directors in order for them to run the Church, but
the authority of the Church has to lie somewhere, and on
some basis. And since the Church has always chosen a
corporate entity, eventually the authority is going to
have vest with the Board of Directors. The only reason
it's worked so long without that occurring is because
everyone has effectively been bound by the authority of
LRH and have ignored corporate lines....

[Charles Parcelle] We could say that the
RRF, [Religious Research Foundation], and CSC are part
of the same church, even though they are corporately
different. I mean if anything was a sham corporation,
it's RRF.

[Allen Wertheimer attorney for L. Ron Hubbard
answers.] As I understand it RRF receives monies
that would otherwise be due to the California Church for
services rendered by the California Church to people
outside of the country who decide to pay the Church from
outside the country.

[CP] That's right.

[AWl So that's basically right?

[CP] That's right. Foreign non-US
Scientologists pay RRF, they go to Flag [the flag Ship
Org, FSO] and take the services. RRF was originally
supposed to hold the money until the service was
rendered and then pay it to CSC. But in fact it has not
really done that and so CSC has rendered much service to
many foreign Scientologists and RRF has got the money.
Fortunately for us RRF wasn't incorporated until 1973
and we're litigating 1972. So I haven't really tried to
sort this one out but it obviously is the classic case
(loud laugh) of inurement, if not fraud (several
laughs).

[Laurel Sullivan] Well put.

[Speaker unidentified] It's all
privileged.

[Dick Sullivan] The tape recorder is going
here Charles.... Now when you talk around a table like
this and there is no internal revenue agent present,
(whispered: I hope so), bugged or otherwise, one can
work out solutions. But when you are a few weeks away
from a trial and everything you say is going to be
rammed down your throat, then you have to start looking
at what actually happened. And it's very difficult to
assign significances to things other than what was
actually being done at the time.

On
September 24, 1984, the US Tax Court ruled against
Scientology's tax exemption in a lengthy and scathing
decision:

"When we consider all the facts spread across the
voluminous record in this case, we are left with the
inescapable conclusion that one of petitioner's
[Scientology] overriding purposes was to make money. We
also conclude that criminal manipulation of the IRS to
maintain its tax exemption (and the exemption of
affiliated churches) was a crucial and purposeful
element of petitioner's financial planning. We need not
repeat in detail our findings regarding petitioner's
efforts to block the IRS from investigating, determining
and collecting taxes from petitioner and affiliated
churches. The highlights of the conspiracy show its
nature and scope.

The
conspiracy spanned 8 years beginning in 1969 and
continuing at least until July 7, 1977 when the FBI,
pursuant to a warrant, searched petitioner's premises
for evidence of the conspiracy and related crimes. The
scheme involved manufacturing and falsifying records to
present to the IRS, burglarizing IRS offices and
stealing Government documents, and subverting Government
processes for unlawful purposes. For example, Freedom of
Information Act requests were planned for the purpose of
having the IRS amass records in one central place where
they would be easier to steal. At first, petitioner's
FBO network masterminded the conspiracy, developing
plans to conceal that OTC was a sham by falsifying and
manufacturing records. Later petitioner's Guardian
Office, whose top officials served on petitioner's board
of directors during the docketed years, directed the
conspiracy. The Guardian Office developed plans to
infiltrate the IRS and steal documents. Later it
monitored the implementation of these plans."

In
response to the loss in court, Scientology president Heber
Jentzsch stated that "This decision has only strengthened our
iron determination to work with other churches, human rights
organizations and concerned American taxpayers to bring about
the reform of America's Gestapo (IRS) and, if necessary, to
bring about its dismantling." Jentzsch told the Wall Street
Journal that Scientology would sue the IRS for $750 million in
damages for violation of their First Amendment rights. On
October 10, Scientology's Freedom magazine placed an ad in the
Los Angeles Times seeking IRS employees who would tell
critical stories about the IRS.

Other
retaliation against the IRS began. In January 1985,
Scientology and former congressman George V. Hansen (R- Idaho)
formed an organization to uncover corruption in the IRS. On
January 30 a large anti-IRS ad was placed in the Los Angeles
Times by the Church of Scientology International. Further such
ads appeared in the Los Angeles Times on February 13 and May1,
and in the Oregonian on April 26. Scientology held an anti-IRS
forum in Clearwater Florida on November 4. In late 1985
Scientology shredded thousands of documents requested in an
IRS investigation.

In 1987
several Appeals Court cases against the IRS were filed by
Scientologists trying to deduct their courses on their tax
returns. In the US 8th Circuit Court in St. Louis, auditing
fees were ruled deductible, while in the 1st Circuit Court in
Boston, they were ruled nondeductible. On July 18th the 9th
Circuit Court in San Francisco ruled that auditing fees were
not deductible. These contrary rulings of course pushed the
issue inevitably to the US Supreme Court.

In July
the 9th Circuit Court of Appeals upheld the revocation of
Scientology's tax-exempt status. President Heber Jentzsch,
vowing to fight on, declared "We're the only group in America
with the guts to stand up against the IRS." In another blow,
the Supreme Court ruled in November that the IRS did not have
to release some documents Scientology was demanding the IRS
release.

In May of
1988 the Supreme Court refused to review Scientology's loss of
tax-exemption, but put on its calendar the issue of whether
auditing fees could be deducted. In July the IRS ruled the
Church of Spiritual Technology (a Scientology corporation) was
not tax-exempt.

The
March/April 1989 issue of Scientology's Freedom magazine spent
several pages criticizing the IRS and requesting IRS
whistleblowers to send them information. In June the U.S.
Supreme Court ruled in the Hernandez case that Scientology
auditing fees were not tax deductible. On June 21 the US
Supreme Court ruled that the "Zolin tapes" could be used by
the IRS to determine a probability of fraud on Scientology's
part. That summer, Scientology hired private investigators to
look into the private lives of IRS officials involved in the
investigation of Scientology's tax status. The July/August
Freedom issue devoted 9 pages ridiculing the IRS. The
December/January issue devoted 11 pages.

In
January 1990 the IRS sent a summons to Scientology to review
records of the Church of Scientology Flag Service Organization
in Clearwater Florida on suspicion that activities of this
group were commercial in nature. In February the IRS went to
federal court in Tampa to obtain this information. In April
David Miscavige, de facto head of Scientology, wrote an
editorial in USA Today calling for the abolition of the IRS.
Also in April, the U.S. District Court in Tampa Florida ruled
that Scientology should turn over most documents requested by
the IRS. On June 20 the U.S. Court of Appeals, Ninth Circuit,
ruled that the "Zolin tapes" could be used by the IRS to show
illegal intent, specifically stating that

We
must therefore examine the transcripts and determine
whether they, along with the independent evidence
already reviewed, demonstrate sufficient evidence of
intended illegality to establish that the tapes are
within the crime-fraud exception. We hold that they do.
The partial transcripts demonstrate that the purpose of
the MCCS project was to cover up past criminal
wrong-doing. The MCCS project involved the discussion
and planning of future frauds against the IRS, in
violation of 18 U.S.C. s 371.

In
October it was reported that Scientologists had been
successfully pressuring their congressional representatives to
inquire as to the IRS "harassment" of Scientology.
Scientologists even protested in front of IRS offices and
offered $10,000 rewards for any IRS agent's whistleblowing.

In June,
1991 Scientology won against the IRS in Boston federal court,
preventing the IRS from viewing some Scientology documents.
Scientology won another case in which it claimed the IRS had
denied Scientology was a religion. In August Scientology sued
17 IRS officials charging them with harassment and illegal
activities. Scientology placed more anti-IRS full page ads in
USA Today and the Wall Street Journal. In October Scientology
leader David Miscavige and cohort Marty Rathbun reportedly had
an impromptu meeting with IRS commissioner Fred T. Goldberg
Jr. in which Miscavige allegedly offered to drop thousands of
lawsuits against the IRS in exchange for exemption. Goldberg
set up a commission to handle the Scientology case, bypassing
normal IRS channels.

In June
of 1992, the US Claims Court rejected Church of Spiritual
Technology's attempt to gain tax-exemption. The court stated
that Scientology's corporate structure is "something of a
deceptus vitus. Real control is exercised less formally, but
more tangibly, through an unincorporated association, the Sea
Organization..." In August, however, the church won against
the IRS in federal court in Los Angeles, winning a $16,881
judgment against the IRS for its refusal to allow Scientology
to view certain documents.

Scientology won again in March of 1993 when the
district court in Boston ordered the IRS to pay Scientology
$80,787 in legal costs over unjustified positions the IRS held
against Scientology. In March the Church of Spiritual
Technology was again denied tax exemption, but then in August
the IRS inexplicably granted tax exemption to every
Scientology entity in the U.S., including Church of Spiritual
Technology, whereupon Scientology filed new applications as
instructed. On October 1 the ruling was formally placed into
effect (but its contents kept secret), and on October 8
Scientology held a rally of over 10,000 members to celebrate
the victory. In his 2 hour speech there, David Miscavige
announced that Scientology had defeated a plot by psychiatry
to destroy Scientology by using the IRS as a tool.

Former
IRS Commissioner Donald Alexander voiced concerns about the
IRS's decision… "I hope that the IRS did not give in to
intimidation… I have great reservations, based on public
record and published stories, about this organization's
activities and whether this was, is, or remains a money-making
cult."

In
November, the IRS issued Rev. Rul. 93-79, 1993-34 I.R.B. 7,
which declared Rev. Rul. 78-189 obsolete (see 1978) and now
allowed auditing to be deductible (despite contradicting the
Supreme Court's Hernandez ruling). No reason was ever given.
On November 10, the consumer affairs group Tax Analysts
submitted a Freedom of Information request to obtain the
exemption agreement. In February 1994, the IRS refused the FOI
request, and Tax Analysts filed suit.

In March
1996, Tax Analysts successfully sued the IRS for the right to
see their field service advice memorandums (FSAs) concerning
the Scientology agreement of October 1993.

In March
1997 the New York Times ran an extensive coverage of
Scientology's road to tax exemption. On March 19 Scientology
responded with a large ad touting the IRS ruling. That same
day, Scientology denied its own previous accounts that David
Miscavige had an impromptu meeting with the IRS commissioner.
On December 30, the Wall Street Journal published the secret
IRS/Scientology agreement on its web page. In their print
article on the settlement, the Journal delineated aspects of
the agreement:

Scientology to pay $12.5 million in
settlement

Scientology to set up a compliance committee to
monitor the church's adherence to the
agreement

Scientology would drop "thousands of lawsuits
filed against the IRS in courts around the country and
to stop assisting people or groups suing the
agency…"

The IRS cancels payroll taxes and penalties
against Scientology entities and officials, and drops
the liens and levies based on these
charges

The IRS drops auditing 13 Scientology
organizations

The IRS drops litigation seeking documents from
Scientology

"'The IRS
normally settles on tax issues alone,' said Robert Fink, a New
York tax lawyer who reviewed the agreement. 'What the IRS
wanted was to buy peace from the Scientologists. You never see
the IRS wanting to buy peace.'"

II. THE
SECRET I.R.S. AGREEMENT WITH SCIENTOLOGY

Were it
not for some anonymous whistleblower, the secret
IRS/Scientology Agreement would still be unknown. There are
many strange and disturbing aspects of the secret agreement
reached on October 1, 1993. The most obvious perhaps is the
weak position Scientology was in to ask for such an agreement.
As the history related above shows, the IRS was more
successful than not in court despite the many suits brought
against it by Scientology. The US Supreme Court sided with the
IRS in the Hernandez case, as the Circuit court did just
months before the Agreement in Church of Spiritual
Technology's suit to gain exemption.

The IRS
granted tax-exemption to Bridge Publications, which in fact
was actually a for-profit corporation.

The IRS
suddenly chose to ignore court rulings in its favor and even
common sense. There was ample and well-documented evidence of
Scientology's abuse of the law, the courts, and the IRS. Yet
all this was set aside in one sudden submission to
Scientology's desires.

Why did
the IRS decide to abandon its position of strength? Could it
have been to purge itself from the thousands of lawsuits
Scientology had then against the IRS and individual auditors,
the anti-IRS articles and actions, and the flood of FOIA
requests by Scientology? The answer is unknown at this time,
but as one magazine pointed out:

"The Church of Scientology settlement represents
a new precedent that may come back to haunt the IRS.
While most taxpayers will not lose sleep worrying about
our national tax collector's problems, it could mean
that, if a taxpayer is wealthy enough and aggressive
enough to file a legion of lawsuits over the course of
many years, the IRS may cut its losses and throw in the
towel to avoid the time and expense of defending a huge
number of cases."

Scientology was required by the Agreement to pay the
IRS $12.5 million, an apparent arbitrary settlement amount not
related to any actual judgment or previous IRS ruling. Tax
Analyst's attorney William J. Lehrfeld stated that "the
Service apparently thinks it has authority just by the mere
power to execute a closing agreement to assert a dollar sum as
the equivalent of a fine or cost without regard to whether it
is a tax, a penalty, or an interest payment… The implications
are enormous." Where did this figure come from? How did it
compare to what Scientology would have owed in back taxes had
it's exemption been denied?

It is
also clear from the history that Scientology was indeed
treating its disputes with the IRS as war. They attacked the
IRS consistently on many fronts; suing and investigating
individual IRS agents, deliberately obscuring their records,
constantly suing the IRS directly, taking out anti-IRS
advertisements, funding anti-IRS groups, lying, infiltrating,
stealing, bugging, offering rewards for IRS whistleblowers,
pressuring congressmen to investigate the IRS, filing
countless Freedom of Information Act requests, creating a
corporate maze, publishing anti-IRS articles in their own
magazines, and other methods. The attacks worked.

The IRS
acquiesced to an unusual desire of Scientology in the
Agreement. As reported in a Scientology magazine, the IRS
itself sent Scientology promotional literature out to other
countries:

"The IRS has agreed to send out leaflets to the
governments of every nation. These letters will state
that they have done a thorough review of all Scientology
activities from top to bottom and having found nothing
wrong - fully recognize us as a bona-fide and qualified
tax exempt organization to the full extent of the law.

Furthermore, they will be attaching to each of
these letters a printed fact sheet on Scientology that
explains what Scientology really is. Who LRH is, and
what all of our organizations are. It is very complete
and very accurate. How do I know?

We
wrote it!

And
the IRS will be sending it out to every government in
the world!"

The IRS
did indeed send out this literature along with a cover letter,
thus using taxpayer funds to promote a specific religion.

The IRS
also does not allow public access to most of Scientology's
1023 forms. These are the documents an organization provides
the IRS in order to obtain tax exemption. According to IRS
rules, most documents supplied by the organization seeking
exemption and most IRS related documents "shall be open to
public inspection at the national office of the Internal
Revenue Service." The 3 exceptions to this open documents rule
are:

1)
"information from which the compensation… of any
individual may be ascertained,"

2)
disclosure of a trade secret, patent, or other
intellectual property that would be harmful to the
organization if disclosed,

3)
names of contributors.

In May of
1995 this writer went to the Exempt Organizations Reading Room
of the IRS in Washington DC to view the Scientology documents
relating to their application for tax exemption. These forms,
called 1023 forms, should be public, as the rules just listed
explain. However, there was approximately 10 linear feet of
material made available for viewing.

This
writer asked to see a contract mentioned in the documents but
not in the available material. This writer was told that there
were two roomfuls of other material, but that it would take a
Freedom of Information Act request to see them. Therefore, in
Scientology's case, MOST of the 1023 forms are unavailable for
public inspection, contrary to the IRS' own rules.

This
issue is raised in the Agreement in a long section where an
apparent agreement was reached between Scientology and the IRS
over which documents would be considered disclosable and which
would not. It seems strange that the IRS did not simply apply
their own rules concerning such documents, but instead
apparently held detailed negotiations over what would or would
not be publicly accessible.

The
Agreement required that Scientology close their corporate
entity World Institute of Scientology Enterprises (WISE). The
Agreement states:

"The members of the CTCC shall, no later than
December 31, 1995, effectuate the dissolution of WISE,
Inc. and the transfer of all of its assets, including
but not limited to its rights to the Scientology
religious marks, to the Inspector General Network."

As of
June 30, 2001, the California Secretary of State still lists
WISE as an active corporation. WISE still has an active web
page. WISE is still active in the United States and abroad.
David Miscavige in his October 8, 1993 victory speech stated
that "Over the last several years we have been expanding our
efforts to get LRH's admin tech into full use. WISE Int. has
now set up a new college to train people in this tech. It is
called the Hubbard College of Administration and as you can
see here, it too is recognized by the IRS!" Apparently, there
was no written penalty for not complying with this portion of
the Agreement, but obviously, WISE was not
dissolved.

Another
Scientology corporation granted exemption is Bridge
Publications. This is particularly unusual since Bridge was
created as a for profit corporation. An internal Scientology
document stated at Bridge's creation that "because of the
change, BRIDGE can also expand tremendously into the
commercial publishing world, which it could not do before.
BRIDGE will be able to distribute its books to commercial book
stores all over the country, and will not be limited to Church
and Mission book stores only." Bridge was therefore created
from the beginning to be a commercial enterprise to sell
Hubbard's secular writings to secular book stores.

However,
to the IRS in their documentation seeking tax exemption, the
story was quite different. "Bridge and NEP have always
operated exclusively for religious purposes."

"NEP and Bridge sell introductory Scriptural
texts such as Dianetics: The Modern Science of Mental
Health and Scientology: The Fundamentals of Thought and
Mr. Hubbard's fictional works through commercial
retailers, but sales are limited.

The
objective of these limited sales through commercial
retailers is to create interest in Mr. Hubbard's works
and thereby to disseminate the religion. Since readers
tend to follow the works of authors they enjoy,
crossover readership often interests the reader in
Scientology."

Once
again, Scientology is trying to claim that a commercial
enterprise is in fact a religious activity. If this is so,
then any commercial enterprise could gain non-profit status
simply by calling itself a religion, and tax-exemption would
simply be a farce. It appears, then, that Scientology
intentionally misrepresented Bridge Publications to the
IRS.

While
Scientology in the above reference claimed that the sales of
Hubbard's fictional books "are limited," on Bridge
Publication's web site they claim that both Battlefield Earth
and the Mission Earth dekalogy have sold over 5 million
copies, and the Mission Earth dekalogy "continues to appear on
bestseller lists in countries throughout the world." These are
hardly limited sales.

The
Agreement has some aspects that apply only to Scientology and
no other exempt religious organization. According to Tax
Notes, the Revenue Ruling 93-73, which allows deductibility of
Scientology auditing sessions, is unique among tax exempt
religions. Catholic religious training, for instance, is not
deductible. Why would the IRS grant an exemption to one
particular religious organization?

III.
SCIENTOLOGY'S VIEW OF THE I.R.S.

On
October 8, 1993, 10,000 Scientologists packed the Los Angeles
Sports Arena for an announcement from Scientology leader David
Miscavige.

"Tonight
you are here to get word of what has been promoted as our
biggest breakthrough on the fourth dynamic [a Scientology term
for society] ever! Let me begin by assuring you that is not an
overstatement!" Miscavige spoke for about 2 hours, outlining a
peculiar view of history that had psychiatrists running the
world and using the IRS to attempt to destroy Scientology. The
"psychs," he declared, "had formulated a plan to infiltrate
all levels of society so that they - and they alone - were the
decision makers as to what was right and wrong." The psychs
felt that Hubbard's Dianetics had become too great a
competitive practice against psychiatry:

So
the psychs turned to the modern day, 20th century
inquisitors. The creatures of the night. That's right,
the vampires. And not little vampires, but the ones who
suck the blood from the whole country, and so the
villain of this plot came on the scene - the Internal
Revenue Service.

It was
extremely important that the IRS not be allowed to deny
Scientology's tax exemption, declared Miscavige, because "a
tax exempt organization is not subject to the myriad
complexities of the Internal Revenue Code which can be used to
harass and destroy organizations the IRS does not like. But
most importantly - because all bona-fide religions and
churches in the United States do have tax exemption, and if
the IRS refused to grant such to Scientology that fact alone
could be used to black PR the Church internationally." From
Miscavige's world view, the IRS could simply not be allowed to
deny Scientology exemption.

The IRS
did deny Scientology's exemption, according to Miscavige, and
caused Scientology havoc throughout the world, "IRS-created
false reports were at the bottom of such infamous attacks as
the Australian inquiry, the UK and South African inquiries,
and attacks on the Flagship Apollo."

Comparing
the IRS to Hitler, Miscavige stated "Don't forget - the IRS
hadn't found the Church doing anything wrong. They just wanted
to get us. So they had to resort to pure lies. Picking up a
technique from their mentor, Adolf Hitler, in his book, "Mein
Kampf", they subscribed to the theory that "the bigger the lie
- the more easily it would be believed."

In
October 1991, Miscavige was in Washington, D.C. and decided to
make an unannounced call on the IRS Commissioner,

"In
October of 1991, while this war was raging at its apex,
Marty Rathbun and I were in Washington DC. to attend one
of these court hearings I mentioned. It was to be the
next day…

Off
we proceeded to 1111 Constitution Avenue - which if you
didn't know is the address of the national headquarters
of the IRS. We presented ourselves to security at the
front door, signed the visitors log and informed them we
were there to see Fred.

They asked - Fred who?

We
answered, Fred Goldberg of course, the Commissioner of
the IRS.

"Is
he expecting you"" they asked.

"No", was our response. "but if you phone him on
the intercom and tell him we are from the Church of
Scientology, I am sure he'd love to see us."

Have you ever wondered whether we were really
impinging, when we have spoken of the IRS at previous
events? Well - if so - shame on you.

We
did meet with the commissioner, and, as the saying goes
- the rest is history."

Later,
Scientology would deny this account and claim there was no
impromptu meeting.

In this speech, Miscavige heaped
scorn on the IRS continuously. He called them liars, puppets
of psychiatry, "vampires," haters, and thieves. He claimed
they paid reporters to write false stories, infiltrated
Scientology, and spread false information to other countries.
It was this paranoid fantasy view of the IRS that partially
fueled the "war" by Scientology. Also, Scientology felt the
need for approval by the IRS so badly that Miscavige and his
predecessor fought a constant battle with the IRS for
years.

Miscavige's predecessor, L. Ron Hubbard, was the
founder of Scientology. He wrote policy letters that are
considered scriptures and that must be followed. Some of these
concern how to deal with the government, what to do about
taxes, and other pertinent topics.

As was
quoted earlier, Hubbard had said "Taxes exist only to destroy
business. Be impudent. Get rich and to hell with them.
Governments are just a reactive bank we have to live with for
a while." Hubbard's view was that government was an enemy.
"The governments are in the business of falsifying other
people's records so as to collect more tax," said Hubbard, who
at the time was under investigation by the tax authorities in
the U.S. and the U.K. Hubbard's solution to taxes
was:

The thing to do is to assign a significance to
the figures before the government can. The whole thing
is a mess only because arithmetic figures are symbols
open to ANY significance. So I normally think of a
better significance than the government can. I always
put enough errors on a return to satisfy their
bloodsucking appetite and STILL come out zero. The game
of accounting is just a game of assigning significances
to figures. The man with the most imagination wins. BUT
there must be correct figures and there must not be
gross misassignment of debts as profits or the whole
thing won't hang together.

IV.
SCIENTOLOGY'S METHODICAL TRIP TO EXEMPTION

There is
strong evidence that Scientology became a religion in order to
gain the exemption and protection that religions have in the
United States.

Hubbard
at first created Dianetics as a business. After a few years he
wrote his co-worker Helen O'Brien about whether to set up
their organization in a different manner, such as a clinic or
counseling center, or "I await your reaction on the religion
angle."

The
religion aspect of Scientology came on gradually. In 1960 he
wrote "Scientology 1970 is being planned on a religious
organization basis throughout the world. This will not upset
in any way the usual activities of any organization. It is
entirely a matter for accountants and solicitors."

"Visual
evidences that Scientology is a religion are mandatory on the
PES [Public Executive Section]," wrote Hubbard in1969,
apparently attempting to make sure Scientology looked
religious. The appearance of religiosity was not enough for
the IRS, however, since the IRS still found problems enough to
disallow exemption.

Since the
IRS would not grant exemption, Scientology fought back.
Scientology's actions against the IRS are consistent with
policies written by L. Ron Hubbard in handling enemies of the
organization. The constant lawsuits, use of private
investigators, anti-IRS advertising, organizations, forums and
articles, all come directly from Hubbard policies:

"Don't ever tamely submit to an investigation of
us. Make it rough, rough on the attackers all the way."

"If
attacked on some vulnerable point by anyone or anything
or any organization, always find or manufacture enough
threat against them to cause them to sue for peace…
Don't ever defend. Always attack."

"If
we do the above as our pattern, we will successfully
bring the following facts into public
consciousness:(a) People who attack Scientology are
criminals.(b) That if one attacks Scientology he
gets investigated for crimes.(c) If one does not
attack Scientology, despite not being with it, one is
safe."

"However, if anyone is getting
industrious trying to enturbulate Scientology or its
activities, I can make Captain Bligh look like a Sunday
school teacher. There is probably no limit on what I
would do to safeguard man's only road to freedom against
persons who, disdaining processing, seek to stop
Scientology or hurt Scientologists."

"When we need somebody haunted we investigate…
When we investigate we do so noisily always. And usually
mere investigation damps out the trouble even when we
discover no really pertinent facts…"

"Never spook if investigated. And don't
co-operate. Sit tight. Be silent. Make the investigator
talk. Gradually put him into session if you
can."

These
policies were followed against the IRS, as history proves.
They are still in force today and still in practice. And, as
the Agreement shows, they can be a successful method in
dealing with perceived enemies.

V.
SCIENTOLOGY POLICIES INCONSISTENT WITH IRS EXEMPTION

It should
be noted that Scientology and Dianetics were created by L. Ron
Hubbard, who was the power directly or indirectly until
approximately 1982, when David Miscavige wrestled absolute
control. Miscavige has been the leader of Scientology ever
since. Miscavige was under Hubbard's direct tutelage before
taking control of the Scientology organization.

There is
a continuity throughout Scientology's leadership of the key
players. Even some of the people that Scientology claimed to
have kicked out after the Snow White trial are still in the
organization. Mary Sue Hubbard is listed as a Patron of the
church in a 1994 Scientology magazine. Henning Heldt has
continued taking Scientology training and is listed as a
Patron. Duke Snider has continued taking courses. Richard
Weigand has helped spread Scientology in Columbia and the
United States. Unindicted co-conspirator Kendrick Moxon is now
one of Scientology's lead attorneys.

Unlike
any other religious organization with exemption, and against
exemption rules, Scientology uses its Doctrine of Exchange in
court to try to show that courses must have fixed fees,
providing a quid pro quo for any courses or items from
Scientology. According to this doctrine, there should never be
a one-way exchange between people or groups. One should always
give something of approximate value in exchange for an item or
service. A 1992 tax case describes this doctrine:

During the administrative process, the IRS
questioned CST regarding the doctrine of exchange. The
doctrine of exchange requires that in order to receive,
it is also necessary to give. A Scientologist is
obligated to exchange something he values for anything
he acquires. Thus, he must exchange cash for auditing
services.

He
must exchange cash for Scientology books. He must
exchange any original LRH documents he possesses for the
satisfaction of advancing the Scientology cause.

The
doctrine was described as a fundamental belief of the
religion, yet at other times, CST insists it is a minor
part of Scientology. It has, however, consistently been
cited as the explanation for why all Scientology
religious services must be paid for by those receiving
them.

CST
explains the doctrine as being based on early writings
of LRH which discuss the importance of balancing inflow
of money or services, for example, with outflow.

Scientology argues in its requests for tax exemption
that Scientology courses must have fixed fees - a practice
that otherwise goes against the prohibition of quid pro quo
transactions in exempt organizations - because of this
religious doctrine. However, the Doctrine of Exchange actually
instead shows that Scientology by its own doctrine should not
even be seeking tax exemption. Scientology utilizes the
services of the federal government as well as state and local
governments. By the Doctrine of Exchange, Scientology must in
return give something for these services and benefits. So, on
the one hand, the Doctrine of Exchange is used by Scientology
itself to try to seek tax exemption, yet on the other hand the
Doctrine actually precludes them from not paying their fair
share of taxes.

The
Doctrine of Exchange in fact is an attempt to create a
religious doctrine out of commercialism. If it is possible for
the IRS to grant exemption to a Church of Commercialism, then
any business could designate itself a church.

Besides
the Doctrine of Exchange and fixed fees, Scientology is
organized and run as a business in most aspects. Those who
proselytize for the organization are called Field Staff
Members, or FSMs. FSMs make a percentage (generally 10%) on
any sale made to the new recruit, be it a book, an e-meter, or
a course. Ken Pirak made $407,000 in 1991 as an FSM. The
contract with Pirak for his proselytizing activities says all
taxes required by any government "with respect to the business
of Pirak… shall be made, filed, and paid by Pirak." Note that
Scientology's own contract labels FSM work as "business."
Scientology therefore uses a commercial method of salesman
compensation in order to gain converts.

Scientology's exorbitant costs are contrary to that of
a charitable religious organization. Books, some written 50
years or more ago, are priced by policy at 5 times the cost to
produce plus twice the postage cost to the farthest church.

Courses
cost up to hundreds of dollars per hour at a fixed rate,
depending on what level the Scientologist is working on. Since
Scientology staff makes only $50 per week, course work can be
extremely lucrative for the organization. Prices are
reasonably consistent in course prices at the Clearwater
Florida organization. Lower level courses, such as the Clear
Certainty Rundown, cost $616 per hour, while OT VIII
Eligibility, one of the highest courses, costs $572 per hour.
The justification for this price scheduling is again the
Doctrine of Exchange.

If a
parishioner is unsatisfied with a course taken, there is a
policy where refunds for course costs will be given. This is
another aspect of Scientology much more like a business than a
religion:

DONATIONS PROMPTLY REFUNDED TO ANY DISSATISFIED
STUDENT OR PRECLEAR IN ACCORDANCE WITH THE POLICIES OF
THE CLAIMS VERIFICATION BOARD. IF THE PRECLEAR OR
STUDENT IS DISSATISFIED AND DEMANDS IT WITHIN THREE
MONTHS AFTER THE TRAINING OR PROCESSING, THE ONLY
CONDITION BEING THAT HE MAY NOT AGAIN BE PROCESSED OR
TRAINED.

Scientology is blatant about its actual goal, which the
IRS seems to have decided is religious:

"A.
MAKE MONEY.J. MAKE MONEY.K. MAKE MORE
MONEY.L. MAKE OTHER PEOPLE PRODUCE SO AS TO MAKE
MONEY."

"Let me also teach you to make tons of money for
the organization."

"Taxes exist only to destroy business. Be
impudent. Get rich and to hell with them. Governments
are just a reactive bank we have to live with for a
while."

"When you move off a point of power, pay all your
obligations on the nail, empower all your friends
completely and move off with your pockets full of
artillery, potential blackmail on every erstwhile rival,
unlimited funds in your private account and the
addresses of experienced assassins and go live in
Bulgravia and bribe the police."

It should
be clear that Scientology is designed as a business, run as a
business, it's goals are business goals, and its founder
profited handsomely by skimming Scientology funds while
simultaneously seeking tax exemption.

It has
been assumed that Scientology is in fact religious. Almost any
organization desiring tax exemption and willing to practice
some deception could create a religious trapping to their
activities. As was related in the history above, Scientology
indeed seems to have begun as a business and then gradually
took on religious cloaking. Dianetics, the precursor and still
Siamese twin of Scientology, was first made public in 1950.
Hubbard has never claimed that Dianetics is religious, yet all
the course work and books on Dianetics obtain the same tax
exemption as the religious Scientology. All Scientology course
work before a member goes "clear" is in fact Dianetics
training and processing. Dianetics training must be completed
before the religious Scientology materials can be
studied.

L. Ron Hubbard constantly makes the claim that
dianetics is a "scientific fact." In fact, he makes that claim
35 times in Dianetics, the Modern Science of Mental Health.
For example, "All our facts are functional and these facts are
scientific facts, supported wholly and completely by
laboratory evidence." Hubbard shows that he regards correct
scientific experimentation to a high degree by carefully
hedging his approval of another scientific experiment done by
someone else. This test was conducted in a hospital to see
whether unattended children became sick more often than
attended children. "The test... seems to have been conducted
with proper controls," he cautiously states, not having
apparently seen the entire written report.

"It is
only after man is sufficiently exteriorized to become a spirit
that we depart from the field of Dianetics; for here,
considering man as a spirit, we must enter the field of
religion." Here Hubbard himself divides Dianetics as the
science from Scientology the religion. "Dianetics is a
science; as such, it has not opinion about religion, for
sciences are based on natural laws, not on opinions." "The
validation of Scientology and Dianetics has engrossed the time
and attention of many auditors and myself… It is, indeed, the
most validated science of mind Earth has ever known."

Generally, Dianetics is still presented today as a
"modern science of mental health" by the Church of
Scientology. And specifically, despite the bifurcation between
Dianetics and Scientology made by Hubbard himself and
Scientology in practice, all Dianetics books and courses are
granted tax exemption under Scientology's umbrella.

What does
Scientology do with its money? According to IRS rules, the
activities of a religious tax exempt organization are supposed
to be of benefit to society. However, much of Scientology's
funds go to attack anyone who dares speak out against
Scientology. Their cadre of attorneys and pool of private
investigators continuously and aggressively pummel anyone
Scientology decides is an enemy. This writer has been followed
by private investigator Christopher E. Nelson, Florida
investigator's license #A9400076, intermittently since moving
to Clearwater in May 2000. Several private investigators seem
to be assigned to staff and members of the Lisa McPherson
Trust.

Scientology follows the religious scripture of L. Ron
Hubbard: "The law can be used very easily to harass, and
enough harassment on somebody who is simply on the thin edge
anyway, well knowing that he is not authorized, will generally
be sufficient to cause his professional decease. If possible,
of course, ruin him utterly." Funds for this activity are
large. Brian Raftery, a private investigator for Scientology,
stated in court that he is paid $187,200 per year to surveil
critics of Scientology in the Clearwater Florida
area.

Scientology's 1023 forms state that their "projected
expenditures for defense" which include legal and professional
fees, was $30 million in 1987-88. In 1990 Bowles and Moxon was
paid $2,172,515.76 and in 1991 $3,678,259.18. Kendrick Moxon
was an unindicted co-conspirator in the Snow White case. He
provided false handwriting samples to the FBI, according to
the Stipulation of Evidence in that case. In 1990 Moxon and
fellow attorney Robert Brennan were fined $27,000 for filing a
frivolous case involving a school dispensing Ritalin. Helena
Kobrin, another Scientology attorney, was fined $17,775 for
filing a frivolous civil RICO claim in 1994 against a former
Scientologist.

Scientology has created a corporate maze that rivals
any organization on earth. The purpose of such a creation is
left to the reader. Below are most of the Scientology
corporate entities:

Scientology considers anyone who speaks out or
criticizes Scientology to be an ememy. L. Ron Hubbard wrote
that an enemy is to be handled by being "tricked, sued or lied
to or destroyed." This policy is often administered by
Scientology attorneys and private investigators as listed
earlier.

Scientology is anti-family through its "disconnection"
policies. This is a requirement for a Scientologist in good
standing to stop communication and interaction with a family
member who has become critical of Scientology:

"A
Scientologist can become PTS [Potential Trouble Source,
a low condition in Scientology] by reason of being
connected to someone that is antagonistic to Scientology
or its tenets.

In
order to resolve the PTS condition he either HANDLES the
other person's antagonism (as covered in the materials
on PTS handling) or, as a last resort when all attempts
to handle have failed, he disconnects from the person.

He
is simply exercising his right to communicate or not to
communicate with a particular person."

In
practice within Scientology, spouses have disconnected from
spouses, children from parents, and parents from children. By
policy, a Scientologist must choose Scientology over their
family member.

Scientology has its own prison system called the RPF,
for Rehabilitation Project Force. The religious explanation is
that if a parishioner becomes disenchanted or uncertain of
their allegiance to Scientology, they can "voluntarily" be in
the RPF and do manual labor until they have a cognition on why
they had doubts about Scientology. The essential ramification
is that the RPF is a penal system designed to pummel
recalcitrant or doubting members into submission.

The RPF
began in 1974 while Hubbard was commodore of a flotilla of
ships. A member on the RPF loses all rights to any activities
besides work assignments and study. He is restricted in
movement and is housed separate from the rest. His pay is
reduced to ¼. He may speak only when spoken to. If married,
one night per week visits are allowed unless the spouse is
also on the RPF. Children may be visited during meal time (30
minutes per meal), but the child must first express a desire
to see the parent. Meal time is separate from the rest. Number
17 of the rules states "And if dismissed from the Sea Org is
to sign a confession of his crimes before leaving the Base."
"The RPF has been created so redemption can occur. This is
basically its only purpose."

On one
RPF assignment order, the reason given was that the person
"committed a suppressive act by blowing [leaving without
permission] two days ago… this resulted in the DCO E&I MAA
SHF going out to her house to recover her." This is the type
of activity that is now tax exempt.

Scientology course work is similar to a Catholic
confessional in that it is a review of the person's past to
find and correct what is causing problems in the present.
However, unlike the Catholic confessional, Scientology
"auditors" write down what the parishioner confesses and
stores it in the person's "pc folder." Thus, there is a
written record of deeply personal and private confessions kept
on each member. There have been complaints by many ex-members
that the privacy of these folders is breached if Scientology
decides to turn against a former member. Detrimental items
from a church's "enemy" are culled and used against the
"enemy." Peter Alexander wrote that during a protest of
Scientology in May of 2000, a Scientologist came up to him as
he was protesting:

After a few words back and forth, the OSA guy
started making comments based upon my PC folder. Now,
for those of you who don't know, I was a Scientologist
for twenty years, gave them a million dollars, and I
have a lot of PC folders! This guy picked what he
thought was the most embarrassing, or demeaning thing in
my supposedly confidential PC folders, and taunted me
with it.

I
explained that while much of what was in my PC folder
turned out to be past life false memory syndrome, I had
expected some level of confidentiality. In fact, the
failure to keep this confidence by an acknowledged
member of the Church Security Staff (who are not
entitled to see or review any guidance counseling folder
by "Church" "policy") was the act of a morally bankrupt
group.

The FBI
raid in 1977 uncovered internal Scientology documents that
included references to utilizing pc folders as intelligence
sources against ex-members. This activity is now also tax
exempt.

VI. CONCLUSION

The
Agreement expired December 31, 1999. A new agreement was
reached, but this also is kept secret by the IRS. The IRS has
little to do now concerning Scientology since exempt
organizations are exempt also from much of the scrutiny
non-exempt organizations are subject to.

This
exemption has ripples throughout the government. Many laws and
regulations handle religious organizations differently than
non-exempt ones. For instance, minimum wage laws may not apply
to certain religious workers. Scientology pays its Sea Org
members $50 per week plus room and board.

International relations have come into play as well.
The U.S. government has condemned both Germany and France for
their "religious discrimination" of Scientology. Germany
considers Scientology to be a business rather than a religion,
while France considers it a dangerous sect. The U.S., largely
because of the IRS exemption ruling, officially treats
Scientology as a religion.

If any
organization's history shows a need for monitoring,
Scientology's certainly does. The exemption hampers
investigation, provides cover for the organization, and gives
it status and privilege that it does not deserve. The
exemption should be immediately rescinded.